NJ Transit Looks Like a Corporation So It Can Be Sued Like One

Constitutional law attorney Christopher Riano wrote an article for Bloomberg Law analyzing Galette v. New Jersey Transit Corporation, a U.S. Supreme Court decision that concerned interstate sovereign immunity. The case arose from two accidents that involved New Jersey Transit buses but took place outside the state. The injured plaintiffs sued the company in the states where the accidents occurred – Pennsylvania and New York – and New Jersey Transit moved to dismiss the lawsuits, arguing that because it was created by the New Jersey Legislature and performs an essential governmental function, it was entitled to sovereign immunity and therefore could not be sued in another state's court without New Jersey's consent. The Supreme Court rejected those arguments, and its reasoning focused on how lawmakers created the entity, identifying as the key question whether New Jersey Transit is legally indistinguishable from the state or it exists as separate corporate body responsible for its own obligations. The unanimous opinion stated that the company was created as a public corporation with many of the typical characteristics of a corporate body, such as the ability to enter contracts, acquire and hold property, and take on debt. As a result, the justices concluded, New Jersey structured its transit authority as a distinct legal entity, making it ineligible to share the state's sovereign immunity. Mr. Riano highlights that the lesson for legislatures is to think carefully when creating public entities such as a transit organization, weighing the benefits and costs of corporate independence and considering the litigation exposure that can result from the same features that enable project finance and operational flexibility.

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